ANCHORAGE -- The Alaska Permanent Fund, created in 1976 to capture a share of the state's vast oil wealth, has grown to $27.7 billion, a sum so large its earnings underwrite handsome checks for every state resident.
But Alaska is running out of revenue to pay its bills, and Republican Governor Frank Murkowski has raised the sensitive question of whether residents should trade part of their dividends for schools, police, and roads.
A group of 55 residents summoned by Murkowski as the "Conference of Alaskans" began a three-day meeting yesterday to decide whether the state's most sacred cash cow should be sliced up to help pay for state government.
"We are threatened with an erosion of essential public services," Murkowski said in his State of the State speech last month. "Alaskans need to consider the health of our society in terms of both the dividends they receive and shared services."
A discussion of Alaska's budget starts and ends with petroleum.
Twenty-seven years after the first North Slope crude oil flowed through the trans-Alaska pipeline, the state still gets more than 80 percent of its general fund revenue from oil taxes and sales of its share of oil pumped from the ground. Revenue from tourism, fishing, and mining are small fractions in comparison.
Alaska's residents pay no state income tax, no state sales tax, and in the state's two largest cities, Anchorage and Fairbanks, not even a municipal sales tax.
But cutting their dividends, paid since 1982 and ranging from $331.29 to a high of $1,963.86 in 2000, will not be an easy sell.
Alaskans have reacted strongly to the threat of losing a collective source of wealth that many view as an entitlement.
Families sock the checks away for their children's education or to buy plane tickets to visit grandparents. In the subsistence economy of rural Alaska, where jobs that pay cash are rare, the annual checks are precious. And for a segment of Alaska's population that considers state government to be bloated, the idea of cutting off checks to pay for more services brings opposition that borders on religious fervor.
In an advisory vote in 1999, 84 percent of Alaskans said no to using the permanent fund to help support state government.
"We think the permanent fund is the last thing the Legislature goes after, not the first thing," said Eddie Burke, state chairman of Alaskans, Just Say No, which opposed the measure in 1999 and will fight a ballot measure this year.
The Alaska Legislature does not need a referendum to spend the fund's earnings, but the advisory vote so cowed politicians, they have dared not do so.
Alaska's spending problems, however, cannot be ignored much longer.
In 10 of the past 12 years, state government spent more than it earned outside the fund.
The Department of Revenue in December estimated the gap this year at $275 million.
The gap has been filled by withdrawing money from an account called the Constitutional Budget Reserve, created by voters in 1990 to hold oil and gas tax and royalty settlements from oil companies. Without change, that fund is projected to run dry by 2007.